15 Investments You Could Buy (at the Right Price) and Hold Forever

Warren Buffett's saying that his ideal holding period is "forever" has been repeated so frequently that it's almost a cliché. But there's more than a little bit of wisdom there for individual investors.

Having a long holding period helps limit trading, and that reduces the transaction and tax costs that can drag on your portfolio's take-home total return. Perhaps even more importantly: If you take care to buy and hold a sturdy basket of core investments, that can help cut the temptation to trade in and out of the market and glom on to whatever is hot today.

Of course, not every investment merits the high level of conviction one needs to buy and hold ... and hold some more. With the help of Morningstar's stock, mutual fund, and passively managed products analysts and strategists, I've compiled a short list of investments that could merit inclusion in an ultra-buy-and-hold portfolio. Among the stocks that made the list, all have wide economic moats, meaning that our equity analysts believe they have sustainable competitive advantages that will help them fend off the competition in their industries for many years. Few, if any, such stocks are trading cheaply right now, but they are worth including on a watchlist of worthwhile companies to consider buying on market dips. For funds and ETFs, we aimed to surface sturdy, low-cost options with shareholder-oriented management teams.

For the Stock-Picker
 MasterCard (MA) and  Visa (V)
These two credit card giants top equity strategist and Morningstar StockInvestor editor Matt Coffina's list of stocks that investors could reasonably hold for many years. Senior analyst Jim Sinegal likens the two firms to tollbooths that will continue to see more traffic as purchasers continue their transition to plastic and away from cash. Sinegal also sees the companies' global presence as a boon: As consumer spending ramps up in developing markets, those buyers will conduct more and more of their transactions via credit and debit cards. The companies derive their moats from the "network effect": Consumers hold Visa and MasterCard because they're accepted at so many retailers, while retailers have little choice but to accept cards that are in so many consumers' wallets. The one key drawback for investors eyeing these stocks today is that they aren't exactly cheap: Both firms are trading above Sinegal's fair value estimate, meaning that interested investors may want to wait for a more attractive entry point for purchase.

 Google (GOOG)
Senior analyst Rick Summer says that it's notably difficult for technology firms to earn a moat, but that Google has managed to do so by dominating the online search market. Initially, the firm took the lead in search by offering superior search technology, but it has held on to its imposing market share because users are so familiar with Google search that they're unlikely to switch to a competing provider. Summer notes that more online searches are conducted on Google than on all other search engines combined, and that 90% of mobile searches are performed using Google. Summer also expects strong secular growth in the online-advertising arena, the benefits of which will accrue to those firms--such as Google and  Facebook (FB)--that boast unique assets and reach. The one fly in the ointment is that, like MasterCard and Visa, the shares aren't exactly cheap. Google is currently trading slightly above Summer's fair value estimate.

 BlackRock Inc. (BLK)
BlackRock is the largest asset manager in the world, with nearly $5 trillion in total assets under management. Senior analyst Greggory Warren says that asset-management firms tend to have moats because of high switching costs; once investors have set up an account with a given firm, they're inclined to stay put. Warren says that the average annual redemption rate in the asset-management industry over all long-term time frames is about 30%, and that institutional shareholders, which account for about 80% of the firm's assets under management, tend to be even more "sticky" than other types of clients. BlackRock was trading right in line with Warren's fair value estimate as of Tuesday, so value-conscious investors might want to wait for a more attractive entry point.

 Altria (MO)
It's a controversial company, to be sure, but Josh Peters, editor of Morningstar DividendInvestor newsletter and head of Morningstar's equity-income strategy, thinks that Altria's moat is tough to beat. Not only does the firm sell an addictive product, but consumers' loyalty to some of its brands gives it pricing power that, in Peters' words, "is consistently strong enough to overcome volume declines and produce rising profits." Its valuation isn't exactly attractive right now, Peters notes, but the company is one to put on a watchlist in case a future market sell-off knocks its price down to a lower level.

For the Active Mutual Fund Buyer
 Dodge & Cox Balanced (DODBX)
Any one of the Dodge & Cox funds would fit well under the "hold forever" banner because they have everything the buy-and-hold investor should be looking for: low costs, a well-articulated and consistently executed strategy, stellar stewardship, and stable management. The funds employ a team structure designed to minimize key-person risk, but in practice the firm's manager retention has been superb: The managers who work on the investment policy committee that oversees the equity piece of the portfolio have an average firm tenure of 25 years, while the average firm tenure on the bond investment policy committee is 18 years. Dodge & Cox Balanced isn't the typical balanced fund, as senior analyst Laura Lallos outlines in her latest analysis, and its losses in 2008 were severe. That said, it's a terrific, low-maintenance core holding for investors who understand what they're getting.

 Vanguard Wellington (VWELX)
As with Dodge & Cox, any of the Vanguard funds skippered by Wellington Management--including Vanguard Wellington,  Wellesley Income (VWINX) , or  Dividend Growth (VDIGX)--would be worthy "hold forever" candidates. Investors in these offerings get two layers of strong stewardship: topflight investment management from Wellington, as well as Vanguard's low-cost, shareholder-friendly wrapper. The venerable Wellington employs a roughly 65% equity/35% bond mix. Strong management on both pieces of the portfolio have made it a fund for all seasons, though its longer-than-average duration could lead to weakness in a rising-interest-rate environment.

T. Rowe Price Target Retirement Series
Target-date funds are ideal buy-and-hold ... and hold ... investments, because they're designed to be completely hands-off, all-in-one products. T. Rowe Price's Retirement Target Date Fund Series is one of two series that earn Morningstar's top marks. The funds geared toward accumulators generally have higher equity positions than rival funds geared toward similar age bands, and that has boosted returns since the market bottomed in early 2009. But an aggressive asset-allocation policy isn't the sole differentiator here; the target-date series draws upon T. Rowe's lineup of solid underlying funds.

 Primecap Odyssey Stock (POSKX)
Like Dodge & Cox, Primecap is a firm with an investment-centric, and investor-centric, culture and a strong history of retaining investment managers. (The firm also runs several funds for Vanguard, but they're closed to new investment.) Management uses a contrarian growth strategy, aiming to scoop up high-growth stocks when they're temporarily beaten down; technology and health-care stocks have long been mainstays. Analyst David Kathman notes that this is the least aggressive of the three Primecap Odyssey funds, and it could reasonably be used as a core holding. However, it's worth noting that all of the Primecap funds have been on a tear, so prospective investors will want to consider a dollar-cost-averaging plan when buying in.

 Fidelity Tax-Free Bond (FTABX)
Few bond shops boast the stability and consistency of Fidelity's municipal-bond operation. This fund, like the others in the firm's lineup, is managed with downside protection in mind. That can limit returns when the muni market rallies, but it's a sensible emphasis given that most investors think of their fixed-income positions as the safe portion of their portfolios. Fidelity has seen some turnover in its muni-fund analyst ranks in recent years, but its lead managers are all quite experienced. Expenses are quite low, at just 0.25% after waivers; that helps ensure that management doesn't have to take disproportionate risks to earn a competitive yield and return. The one caveat is that the fund lands in Morningstar's long-term muni category, so investors must also have a long time horizon to own it.

For the Index Enthusiast
Vanguard Target Retirement Series
With T. Rowe Price, Vanguard's Target Retirement Series earns a Morningstar Analyst Rating of Gold. In contrast with T. Rowe's series, however, Vanguard's target-date funds are composed of index mutual funds rather than active, a setup that helps it keep costs ultralow. That sustainable advantage has consistently helped the funds in the series to competitive or better returns, despite the fact that their glide paths aren't dissimilar from the category norms.

 Vanguard Total Stock Market (VTI) or (VTSAX)
This total market tracker is the consummate core buy-and-hold investment for investors with long time horizons. It offers exposure to U.S. stocks of all sizes and styles, and could reasonably serve as an investor's sole equity fund. Ultralow costs, for both the ETF and the traditional index-fund alternative, provide a long-term tailwind.

 Vanguard Total International Stock Market (VXUS) or (VTIAX)
The foreign-stock counterpart to Vanguard Total Stock Market Index, this fund provides exposure to all manner of foreign stocks, from developed-markets giants like  Toyota (TM) and  Royal Dutch Shell (RDS.A) to small-cap and emerging-markets names. Low expenses--surprise surprise--burnish its appeal.

 Vanguard Total Bond Market Index (BND) or (VBTLX)
Experts may debate whether the Barclays U.S. Aggregate Bond Index, which this fund tracks, is representative of the U.S. bond market, but there can be little doubt that these funds--both the ETF and traditional index mutual fund--provide a lot of diversification in a single, low-cost shot. The fund has held its ground reliably when equities have hit the skids, and that uncorrelated performance pattern is a key reason investors hold bonds.

 Schwab U.S. Equity Dividend ETF (SCHD)
While Vanguard's lineup of index funds and ETFs is hard to beat, Schwab has come on strong in the indexing sweepstakes, fielding several ultra-low-cost broad market ETFs as well as this, the lowest-cost dividend-focused ETF. A criterion that each of its holdings has paid a dividend for each of the past 10 years, as well as additional screens for profitability and balance-sheet strength, give the portfolio a high-quality tilt.

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